7 ways a bad credit score can affect you

Bad credit can impact your life in ways you’ve never even thought of, and that’s true regardless of where your score falls within the bad credit range. The fact is, having a FICO score below 580 makes it more difficult to get a credit card, purchase a home, buy a car or even get a job, and you’ll likely pay more fees and higher interest rates until you’re able to boost your credit into the fair or good range.

If you have poor credit, you should be aware of all the ways it can affect you. Here are seven examples of ways it can, which you may be able to avoid by taking steps to increase your score right away.

1. Fewer credit card and loan options

Lenders view applicants with lower credit scores as higher risks, which shouldn’t come as a surprise. However, you may be surprised by the sheer number of credit cards and loans you can’t qualify for with a low credit score. The fact is, the best rewards credit cards and loans all go to consumers with a “good” credit score at the very minimum, or a FICO score of 670 or above.

With a bad credit score, you may not be able to qualify for a personal loan or a line of credit at all. Some credit cards for people with bad credit exist, but they are typically secured credit cards that require a cash deposit as collateral. Unsecured credit cards for bad credit are few and far between, and they tend to come with few perks and minimal (if any) opportunities to earn rewards.

2. Higher interest rates and fees

If you can get approved for a credit card or loan with bad credit, you’ll definitely pay a higher interest rate and more fees along the way. Higher rates can make carrying a balance considerably more costly over time, which means everything you purchase will cost a lot more than you originally paid.

Loan fees can also add up quickly. Some credit cards for bad credit charge annual and application fees, while personal loans for bad credit tend to charge origination fees.

3. Difficulty getting a mortgage

If you have a low credit score, you’re unlikely to qualify for a conventional home loan. You may be able to qualify for a government-backed home loan, like an FHA, but if your credit score is below 580 you’ll need a down payment of at least 10 percent, according to Rocket Mortgage.

You might be able to apply for some mortgages with a co-signer, but your options will still be limited.

4. Trouble renting a place to live

You may even have trouble renting a place if you have poor credit, mostly because landlords will want to run a credit check before they can approve you for a property.

If you have a low score or plenty of negative reporting on your credit history, property owners may require you to find a co-signer.

5. Higher insurance costs

Auto insurance companies determine premiums based on factors like your age, the car you drive and your driving history, but many also consider your credit score. Some see your ability to pay bills on time and use credit responsibly as an important factor when determining how much risk you pose as a driver.

If you have bad credit, you’ll almost certainly pay higher insurance costs as a result.

6. Fewer career opportunities

Employers can’t actually check your credit score for hiring purposes, but they can request to see a modified version of your credit report. This can help them verify details about you, including whether you typically pay your bills on time.

If your credit score isn’t up to snuff, this can spell disaster — a low score or negative information on your credit report could mean missing out on a job opportunity.

7. Upfront costs for utilities

You may have to pay more upfront costs to set up utilities if you rent an apartment or house on your own because utility companies also see those with poor credit scores as risks.

Deposits for utilities are refundable at some point, especially if you close your account in good standing, but they still require you to come up with extra money during a move.

Bottom line

Having poor credit makes life harder than it needs to be, but you do have some control over where your credit score lands. By taking steps to boost your score, for example, you have the potential to sidestep many of the hassles and added costs we’ve outlined.

Fortunately, better credit can be a reality if you start right away. For the biggest impact on your credit in the shortest amount of time, you should take steps like paying all your bills on time, paying off debts in collections and paying down any unsecured debts you have.

With some time and plenty of patience, you can see an improvement in your credit score and your lifestyle in no time.